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The Specificity of General Human Capital: Evidence from College Major Choice

  • Ronni Pavan

    (University of Rochester)

  • Josh Kinsler

    (University of Rochester)

In this paper we develop a model to estimate the return to college major and to understand why students appear to give up part of their earnings potential by selecting less profitable majors. Starting from the empirical evidence that individuals who work in a job related to their major field of study earn significantly higher wages than those working in jobs unrelated to their major, we build a model in which part of the human capital accumulated while in college is specific to their field of study. This specificity of human capital may introduce a sort of occupational risk if the potential human capital is not perfectly observed by the agent at the moment of major choice. After rejecting the hypothesis that agents have perfect knowledge over their potential future labor market abilities, we show that this type of occupational risk helps explain why relatively few students choose science related majors.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 1036.

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Date of creation: 2012
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Handle: RePEc:red:sed012:1036
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Web page: http://www.EconomicDynamics.org/society.htm
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  1. Arcidiacono, Peter, 2002. "Ability Sorting and the Returns to College Major," Working Papers 02-26, Duke University, Department of Economics.
  2. Beffy, Magali & Fougère, Denis & Maurel, Arnaud, 2009. "Choosing the Field of Study in Post-Secondary Education: Do Expected Earnings Matter?," IZA Discussion Papers 4127, Institute for the Study of Labor (IZA).
  3. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May.
  4. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  5. Ronni Pavan, 2006. "Career Choice and Wage Growth," 2006 Meeting Papers 504, Society for Economic Dynamics.
  6. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538.
  7. Christina Gathmann & Uta Schönberg, 2010. "How General Is Human Capital? A Task-Based Approach," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 1-49, 01.
  8. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  9. Paul Sullivan, 2010. "A Dynamic Analysis Of Educational Attainment, Occupational Choices, And Job Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 289-317, 02.
  10. Joseph G. Altonji, 1991. "The Demand for and Return to Education When Education Outcomes are Uncertain," NBER Working Papers 3714, National Bureau of Economic Research, Inc.
  11. McCall, Brian P, 1990. "Occupational Matching: A Test of Sorts," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 45-69, February.
  12. Shintaro Yamaguchi, 2012. "Tasks and Heterogeneous Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 1 - 53.
  13. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
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